Australian sales ‘strategic’: Branson

Virgin Group’s Richard Branson says he’s not on a “selling spree” of Australian assets – but there could be more sales to come.
Photo: Philip Gostelow

by
Andrew Cleary

Virgin Group founder
Richard Branson
has denied he is on a “selling spree" of Australian assets but left open the possibility of selling his entire stake in
Virgin Australia
.

The airline’s co-founder said his decision to sell a 10 per cent stake to Singapore Airlines, worth $123 million, was consistent with Virgin Group’s long-term strategy for eventually limiting equity investments in its different ventures around the world.

Holding on to his remaining 13 per cent in the Australian airline is far less important to Sir Richard than a branding agreement with Virgin Australia that will remain in place for the duration of his lifetime, he said on Tuesday.

“I’m not too worried about whether we sell down most of our stakes," he said. “The 13 per cent is pretty strategic in that it could be very valuable to a player one day, but it’s not that important from the Virgin Group’s point of view."

The sale of the Virgin Money financial services arm to
Bank of Queensland
, a $40 million cash and scrip deal, was “an incredibly strategic move" that would see Sir Richard’s private company earn more through royalties than it could on its own, he said.

Sir Richard, who played a key role ­in the appointment of
John Borghetti
after the former
Qantas Airways
executive was passed over for the top job at that airline, said the Virgin CEO had transformed the smaller airline within three years, much to the detriment of its rival.

“I think Qantas made the biggest mistake ever by not making [Mr Borghetti] their chief executive, and if they had, I think the Australian aviation scene would have been extremely different today," he said.

“He came with a mission to prove Qantas wrong. He wouldn’t say that himself but I’m sure that’s the case. We’ve been delighted that he’s gone all out to show that they made a dreadful mistake."

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The Virgin Australia co-founder flew in to Perth on Tuesday for the launch of the company’s new regional airline, largely consisting of the Skywest Airlines fleet and focusing on intra-Western Australia routes and the fly-in, fly-out market.

The recent takeovers of low-cost carriers Tiger Airways and Skywest, coupled with Virgin’s existing order book, will see the enlarged group quickly grow to 170 aircraft from 80 in 2010, Mr Borghetti said.

That forecast could unsettle investors concerned about the recent influx of seats for sale in the domestic market, a trend that has benefited consumers through cheaper air fares and hurt earnings at both Virgin and Qantas.

Mr Borghetti talked down some aviation analyst commentary that the return of Australia’s aviation market to a duopoly would reduce competition and raise fares.

While the old duopoly was between Qantas and Ansett Australia, which were two full-service carriers, the situation after Virgin’s recent acquisitions left two full-service carriers, two low-cost airlines, and multiple regional and charter operators competing, Mr Borghetti said.

He denied suggestions from within the ranks of some of his own international alliance partners that Virgin’s shareholders, which include Singapore Airlines and Air New Zealand at just under 20 per cent and Etihad Airways hovering below 10 per cent, could complicate the bilateral relationships with the different carriers.

“When people say that they either don’t understand the industry or they don’t understand the professionalism and pragmatism of these airlines," Mr Borghetti said.

“These are companies that have decided to invest in us because they believe in the strategy, they believe in management, and they believe in the commercial benefits to both of us. I think that’s where it starts and ends."